HDFC Bank initial update points to very strong growth in loans & retail deposits; brokerages see up to 43% return

Shares of HDFC Bank were trading with over 13% gains in Monday's intraday trade after the company entered into an agreement to be merged with HDFC Ltd. The scrip was trading near its 52-week high value of Rs 1,724.30, which it touched in October last year, on Monday.  After the merger announcement, shares of the leading private lender surged to trade at day's high of Rs 1721.85 a share in Monday's intraday trade on the BSE. \ 

Meanwhile, ahead of the merger announcement, global brokerages came up with their recommendations on HDFC Bank. The most aggressive target for this share was put out by Jefferies, which sees an upside of over 40%. HDFC Bank target price has been based on April 1 closing price of the share, which is Rs 1506 a share.  

Jefferies on HDFC Bank  

The brokerage has maintained a buy rating on HDFC Bank with a target price of Rs 2160 per share, which translates into an upside of 43% on April 1 closing price of Rs 1506 per share.  

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CLSA on HDFC Bank 

CLSA sees an upside of 34% in the stock on Friday's closing price of Rs 1506 per share. The target set out by CLSA for HDFC Bank is Rs 2025 a share. The brokerage is of the view that the bank has reported big growth surprise QoQ with a 8.4% growth, however, NIM trajectory will be key going forward. "Retail growth was in-line at 5% QoQ, while CASA momentum remained strong too at 10% QoQ. Focus will shift to see how its NIM trajectory pans out,." it says.   

Morgan Stanley on HDFC Bank  

Maintaining Overweight rating on HDFC Bank, Morgan Stanley sees a return of nearly 20% on Friday's closing price of Rs1506. The target price set by the brokerage is Rs 1800 per share.  

"Bank's initial update points to a very strong growth in loans & retail deposits, & implies continued market share gains. Loan growth strong in retail & commercial, with big surprise in corporate banking relative to estimates, " says Morgan Stanley.  

CITI on HDFC Bank  

CITI too maintained a buy rating on HDFC Bank. At target price of Rs 2,000, the upside comes out at over 32% from Rs 1506 recorded on April 1.  

HDFC Bank reported loan growth of 21% YoY. The first quarter loan growth is more than 20% since 1QFY21 & up from 16%YoY reported in 3rd quarter. Sequential growth of 9% qoq is 2nd highest in past decade, leading to loans of Rs13.7tn, 3.5% ahead of estimates," says the brokerage.   

Macquarie on HDFC Bank  

Macquarie maintained a buy rating as well with target price of RS 2005 that comes out 33% on closing price of Rs 1506 a share on Friday.   

HDFC, HDFC Bank Merger details  

Meanwhile, HDFC Limited will merge into HDFC Bank, India's largest private sector bank by assets, as part of transformational merger.  

Post-merger, subsidiary/associates of HDFC Limited will become subsidiary/associates of HDFC Bank. HDFC Limited shareholders will receive 42 shares of HDFC Bank for 25 shares of HDFC Limited as per the scheme of arrangement. HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC Limited will own 41% of HDFC Bank 

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision)